Peril of the Inflation Exit Condition
The Japanese Economic Review, 2019, vol. 70, issue 1, 4-27
Recent empirical evidence on monetary policy in Japan suggests that exits from the zero‐interest‐rate policy triggered by policy shocks can be expansionary. This paper provides theoretical examples of such expansionary policy‐induced exits. The examples suggest that the exit condition (the Bank of Japan’s stated commitment of not exiting from the zero‐rate regime unless the inflation rate rises above a certain threshold) may have made it difficult for the economy to escape from the liquidity trap.
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jecrev:v:70:y:2019:i:1:p:4-27
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